Ajay Sahai, DG & CEO, Federation of Indian Export Organizations (FIEO), explained how global trade is slowing down and how the WTO revised its prediction for trade from 4.7% to 3% in April 2022, saying that this was certain to affect India’s export performance as well. “However, the demand for low-quality goods is rising. The volume of exports remains unaffected, even though the value may be lower than last year. Even though the export base is declining, we have been growing over the past five months compared to the same period last year. We will nudge toward $470 billion or more this fiscal, he added, addressing on Wednesday at a conference held by the business group in the city
He continued by saying that the steep reduction in freight rates, which had fallen by nearly 50% on important trade routes, was also evidence of the contraction in world trade. Dropping from $14,000 to $4,000 and $8,000, respectively, was the freight from Asia to North Europe and the US (West Coast).
Sahai emphasised that inventories have been quite high internationally in all economies while discussing how inflation has been a problem in all economies. He continued, “Purchasing power has decreased, which has had an impact on offtake and consequently demand is declining.
When speculating on how exports would increase beyond October, Sahai said that favourable perceptions of India and the high costs of manufacturing in China will be to the Indian economy’s advantage. “We have observed consumer responses in the USA and Japan. Because of their greater costs and lower reliability as a result of their zero-tolerance policy for corruption, buyers are fleeing China. Many orders for low-value goods, which were essentially China’s monopoly, are now coming to India, he claimed.
While export growth is to be supported by all sectors, Sahai mentioned certain areas would drive this growth faster. “On the agriculture front, we are doing well. Electronics is growing by 50% or so, though on a low base. We expect engineering exports to pick up as well. The recent decline has been due to the raw material. Export has come down with levy of export tariff, but the government is looking to review export tariff on steel items. We expect our traditional sectors to do well and think that by the end of December, we will have far better results,” he said.
Sahai elaborated on the Russia-Ukraine conflict and its short-term impact on exports, claiming that once the Rupee payment mechanism is put into place, India will be on track to grow its exports to Russia. According to our analysis, the demand for Indian goods in Russia can be increased by $5 billion provided payment methods are put in place and logistical problems are resolved.
Sahai elaborated on the Russia-Ukraine conflict and its short-term impact on exports, claiming that once the Rupee payment mechanism is put into place, India will be on track to grow its exports to Russia. “As per our research, if payment mechanisms are put in place and logistic issues are addressed, we can add $5 billion to Russia because demand is there for Indian products,” he said
A Sakthivel, the president of FIEO, backed up his claims by stating that the RBI has released a rupee trade mechanism. “Banks in India are prepared. The State Bank of India is prepared to transact in Russian rubles, but they must first select a single Russian bank. The Commerce Secretary stated that the Russian government will choose a bank, and that the exchange of rupees for rubles with Russia is anticipated to take place soon.
In order to protect ourselves against both a trade deficit and a current account deficit, FIEO also emphasised increasing the bar for service exports in the current year.
Supporting e-commerce retail exports, which have a 10x multiplier potential in three years, FIEO stated that these exports need to be promoted by addressing numerous regulatory obstacles and giving them at least the same advantages as the merchandise industry. The new Foreign Trade Policy (FTP) should acknowledge the..”We would like the new Foreign Trade Policy (FTP) to recognise the potential of the sector which can be a game changer to produce results in a very short time for some of the Government projects like GI goods or One District One Product,” the business group said in a press release.
The FTP, which is anticipated by the end of the month, will give a path for achieving $1 trillion in annual exports of both commodities and services by 2030, according to FIEO. This will necessitate new business ventures, export start-ups, and a shift in domestic firms, particularly MSMEs, in favour of exports. We also anticipate that a shortage of skilled workers in the exim sector will be a barrier to achieving this challenging but doable goal. A Foreign Trade Sector Skill Development Council may be established to just focus on the skill requirements of the foreign trade, the apex exports organisation added.
